There's a pattern I've seen repeatedly in companies heading for trouble.

It's not always visible in their bank statements. It's not obvious in their sales reports.

It appears in the relationship between their Vital 5 numbers:

• Sales (trending up)
• Gross Profit (flat or declining)
• Gross Profit Percentage (declining)
• Net Profit (declining faster than gross profit)
• Cash Balance (declining faster than net profit)

When these metrics move in opposite directions, it's a red flag for business optimization.

I call it "The Divergence."

One client came to me celebrating 30% revenue growth. Their top line was booming.

But beneath the surface:

• Gross profit increased only 12%
• Gross profit percentage fell from 42% to 36%
• Net profit decreased 8%
• Cash dropped 22%

They were selling more but keeping less—a classic death spiral disguised as success.

The causes varied:

• Chasing low-margin sales for vanity metrics
• Inefficient scaling increasing overhead
• Poor client selection diluting profitability
• Inventory bloat consuming cash

We implemented an immediate correction plan:

• Established minimum margin requirements
• Created efficiency metrics for new growth
• Implemented cash conversion cycle monitoring
• Restructured incentives around profitability, not just revenue

Within two quarters, we achieved:

• 5% revenue decrease
• 15% gross profit increase
• 8% net profit increase
• 40% cash balance improvement

The learning was powerful: growth that damages your profit margins isn't growth—it's disguised decline.

Monitor the relationships between your Vital 5 numbers. When they diverge, investigate immediately. Your business's survival depends on it.